Stocks plunge as economic crisis deepens

Fearful of a deep recession, investors ignored government efforts to calm markets and yanked more money out of Wall Street on Thursday, sending major stock indexes down more than 7 percent and leaving market pros and amateurs alike wondering where the bottom is.

The Dow Jones industrial average of blue-chip stocks plunged 7.3 percent to close at 8,579.19, marking a stunning 39-percent descent from its all-time high of 14,164.53 precisely one year earlier. The broad Standard & Poor's 500 dropped 7.6 percent, finishing 42 percent below its record high.

And despite signs early in the day that technology stocks might stabilize, the tech-heavy Nasdaq finished down 5.5 percent. Struggling Yahoo and Sun Microsystems each dropped about 8 percent to lead Silicon Valley's slide.

Asian stocks plunged today, with Japan's benchmark index falling more than 9 percent. Markets in Hong Kong, Australia, South Korea, Thailand and the Philippines were all down more than 7 percent.

The downward momentum showed investors haven't been reassured by coordinated international efforts to stabilize the global economy through massive bailouts, infusions of cash and lowered interest rates. Overall, the day's activity drained billions of dollars of value from millions of individual retirement accounts and 401(k) plans.

"Boy, this is scary. Very, very scary," said retired schoolteacher Bev Rodericks on a visit to San Jose's main post office on Lundy Avenue. "I'm worried about how its going to affect my retirement."

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Another postal customer, Linda Barker, said she and her husband were following the news and hoping they're getting good advice: "Everybody is telling us to sit tight, don't panic and wait it out."

Silicon Valley venture capitalists and angel investors have urged executives of their portfolio companies to tighten budgets and plan for staff reductions in the months ahead.

"The name of the game in this environment in some respects is survival — survival until conditions change," angel investor Ron Conway said in a memo to about 20 start-ups. Those who are able to raise money, he added, should grab as much as they can.

Wall Street's downward spiral worried market analysts as well. "The story is getting to be like that movie 'Groundhog Day,' " Arthur Hogan, chief market analyst at Jefferies, told the Associated Press, referring to a film in which a man seems stuck in a bad day that keeps repeating.

"Until that starts coming down, you'll be hard-pressed to find anyone getting excited about stocks," he said. "Everything we're seeing is historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic.''

More bad news on Thursday contributed to the sell-off. A forecasting survey of 52 economists conducted by the Wall Street Journal concluded that the U.S. economy has sunk into recession and government action is critically needed.

The economists predicted the U.S. gross domestic product would contract in the third and fourth quarters this year, as well as in the first quarter of next year. That would mark the first time in more than 50 years that U.S. GDP — the total value of goods and services produced — declined for three consecutive quarters.

In Silicon Valley, a few companies offered glimmers of hope. Applied Materials was up 2.7 percent and NetApp up 1.1 percent. But most numbers were negative: down 6.3 percent for Cisco, down 6.2 percent for eBay, down 2.7 percent for Google.

Early in the day, both Intel and Apple traded in positive territory, but Intel finished down 4 percent and Apple lost 1.2 percent.

Even for people not heavily invested in the market, Wall Street's plummet adds to a grim specter that includes home foreclosure sales in their neighborhoods and rising unemployment.

"It's scary," said Tom Nguyen, owner of a San Jose machine shop that mills equipment for semiconductor and medical device firms. Nguyen said he swore off stocks after losing about $40,000 during the dot-com bust, but that hasn't insulated him from the current downturn. He's seen a sharp drop in business at his shop this year.

Carlos Suarez, a Stanford-educated economist and political scientist who emigrated from Venezuela two years ago, may be counted among the growing ranks of the "underemployed." Last year, Suarez said, he was busy with consulting contracts for several local school districts. But with those contracts disappearing, he's now looking for a payroll job.

Barker, as the principal of Robert F. Kennedy Elementary School in East San Jose, said the wave of foreclosures has caused Kennedy's enrollment to spike from 764 to more than 800, because so many families have moved into rental property near the school. "It puts additional stress and strain on the families and the children," she said.

Phil Bollum, a recently retired real estate appraiser, said he and colleagues could sense how the subprime mortgage market was headed for a reckoning. At age 65, Bollum said he considered himself "extremely lucky" to have only a modest portfolio and be living on rental property income and Social Security. But one of his neighbors, he added, is in foreclosure.